Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

<ul>
<li>In 2022 (the first year with the RCEP fully operational), ASEAN's bilateral trade deficit with China nearly doubled to US$163bn, while China's surpluses with Japan and Korea shrank. </li>
<li>RCEP entailed the reduction in tariffs, but non-tariff barriers (China's primary form of protection for its economy) remained unaffected. Ironically, China has seen big unilateral gains from implementation of RCEP. </li>
<li>The imposition of higher US tariffs since 2019, and tighter export controls since 2022, has shrunk China's bilateral trade surplus with the US, while boosting the rest of Asia's surpluses. </li>
</ul>


In 2022 (the first year with the RCEP fully operational), ASEAN's bilateral trade deficit with China nearly doubled to US$163bn, while China's surpluses with Japan and Korea shrank. 
RCEP entailed the reduction in tariffs, but non-tariff barriers (China's primary form of protection for its economy) remained unaffected. Ironically, China has seen big unilateral gains from implementation of RCEP. 
The imposition of higher US tariffs since 2019, and tighter export controls since 2022, has shrunk China's bilateral trade surplus with the US, while boosting the rest of Asia's surpluses. 


RCEP Is Benefitting China, but Not ASEAN; Latter Gains US Market-Share

Deputy Chief Economist

Sharmila Whelan

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Last week we wrote that accelerating economic integration in the Greater Bay Area is  lies at the heart of China’s strategy to win the battle for economic supremacy.  It is key to China’s future economic prosperity and, directly counters America’s China containment strategy. Beijing recognises China containment will remain the lynchpin of US foreign policy. A Biden US presidency ensures that development of the GBA is only set to speed up. Companies are investing in next generation industries to meet the wants of the GBA’s tech-savvy consumers and are optimistic about revenue growth over the next three years. For investors seeking superior returns the case for investing in GBA companies has never looked stronger.

Last week we wrote that accelerating economic integration in the Greater Bay Area is  lies at the heart of China’s strategy to win the battle for economic supremacy.  It is key to China’s future economic prosperity and, directly counters America’s China containment strategy. Beijing recognises China containment will remain the lynchpin of US foreign policy. A Biden US presidency ensures that development of the GBA is only set to speed up. Companies are investing in next generation industries to meet the wants of the GBA’s tech-savvy consumers and are optimistic about revenue growth over the next three years. For investors seeking superior returns the case for investing in GBA companies has never looked stronger. 

Biden Vs. Xi - What Are Businesses Doing?

Accelerating economic integration in the Greater Bay Area is  lies at the heart of China’s strategy to win the battle for economic supremacy.  It is key to China’s future economic prosperity and, directly counters America’s China containment strategy. A hub for high-tech advanced manufacturing and modern service industries the GBA is the laboratory for China’s innovation-driven development strategy, key to the success of President Xi’s Dual Circulation economic framework and Belt&amp;Road Initiative. Beijing recognises China containment will remain the lynchpin of US foreign policy. A Biden US presidency ensures that development of the GBA is only set to speed up. For investors seeking superior returns the case for investing in GBA companies has never looked stronger.

Accelerating economic integration in the Greater Bay Area is  lies at the heart of China’s strategy to win the battle for economic supremacy.  It is key to China’s future economic prosperity and, directly counters America’s China containment strategy. A hub for high-tech advanced manufacturing and modern service industries the GBA is the laboratory for China’s innovation-driven development strategy, key to the success of President Xi’s Dual Circulation economic framework and Belt&amp;Road Initiative. Beijing recognises China containment will remain the lynchpin of US foreign policy. A Biden US presidency ensures that development of the GBA is only set to speed up. For investors seeking superior returns the case for investing in GBA companies has never looked stronger. 

Our money is on Taiwan. The pandemic is behind, the economy is rebounding faster than anticipated. Underlying fundamentals of the 2019 business cycle upswing resuming. The damage to corporate profitability has been limited compared with regional peers Korean and Japanese companies and the investment upcycle has not be derailed. We expect Taiwan to among this year’s regional growth outperformers. The only downside risk is rising Taiwan-China tensions. But we suspect change is afoot.

Our money is on Taiwan. The pandemic is behind, the economy is rebounding faster than anticipated. Underlying fundamentals of the 2019 business cycle upswing resuming. The damage to corporate profitability has been limited compared with regional peers Korean and Japanese companies and the investment upcycle has not be derailed. We expect Taiwan to among this year’s regional growth outperformers. The only downside risk is rising Taiwan-China tensions. But we suspect change is afoot.  

With the rest of the world still in various stages of lock-down, China has returned to its traditional export- and investment-driven economy -- fueled by a surge of TSF (which rose 56.9% YoY faster in Jan-Jul 2020), implying a new burst of shadow-financing. Exports rose 9.5% YoY in August, and China's steel production rose 9.1% YoY (while the rest of the world's declined 16.1% YoY) in July. So it is worth staying Overweight China for now. But its imports contracted 2.1% YoY in August, and retail sales have declined YoY each month of 2020, illustrating the continuing slump in domestic demand; once the rest of the world has no need to absorb the massive new capacities China has added in the past 4 months, China's imbalances will become a major dampening factor for its financial system in 2021.   China's total social financing (TSF) has increased by RMB22.39 trillion  (US$3.26 trillion) in January-July 2020, 56.9% faster than for the same period in 2019, with shadow-banking seeing a powerful rebound. This boosted FAI (fixed asset investment), albeit mainly public FAI (+3.8% YoY in the year-to-date), while private FAI declined 5.7% YoY. But after a severe decline in 1Q 2020, FAI began growing in April, and was up 9.3% YoY in April-July 2020, resuming its role as the main driver of China's economy. Retail sales, meanwhile, declined YoY in every month of 2020. As the originator of Covid-19 (or the "Wuhan Coronavirus"), China had a two-month headstart on dealing with the crisis, and was able to contain it within Hubei province (of which Wuhan is the capital), the only part of China that was fully locked down in January and much of February. Once the rest of the world began to lock down, China was in position to reopen, and its exports have consequently accelerated steadily, growing 7.2% YoY in July and 9.5% YoY in August 2020. The rebound in FAI is, for now, being partly validated by the rebound in global demand for China's exports, at a time when much of the rest of the world is partially locked down.  This is well illustrated in the steel industry, where China's output has increased 5.9% YoY in the past 3 months (May-July 2020) while the rest of the world's steel output has declined 20.5% YoY. As long as the rest of the world's economy remains in various stages of lock-down, China's relatively undisrupted economy will gain global market-share. During this phase (likely to last at least through October 2020), investors should remain Overweight China. The weakness of private consumption means that any setback to China's exports (likely once the rest of the world's supply-chains begin normal functioning by November-December 2020) will be impossible to counter with domestic demand. The imbalances of excess capacity built up over the past 4 months of strong FAI (particularly public FAI) will then rebound on China.

With the rest of the world still in various stages of lock-down, China has returned to its traditional export- and investment-driven economy -- fueled by a surge of TSF (which rose 56.9% YoY faster in Jan-Jul 2020), implying a new burst of shadow-financing. Exports rose 9.5% YoY in August, and China's steel production rose 9.1% YoY (while the rest of the world's declined 16.1% YoY) in July. So it is worth staying Overweight China for now. But its imports contracted 2.1% YoY in August, and retail sales have declined YoY each month of 2020, illustrating the continuing slump in domestic demand; once the rest of the world has no need to absorb the massive new capacities China has added in the past 4 months, China's imbalances will become a major dampening factor for its financial system in 2021.   China's total social financing (TSF) has increased by RMB22.39 trillion  (US$3.26 trillion) in January-July 2020, 56.9% faster than for the same period in 2019, with shadow-banking seeing a powerful rebound. This boosted FAI (fixed asset investment), albeit mainly public FAI (+3.8% YoY in the year-to-date), while private FAI declined 5.7% YoY. But after a severe decline in 1Q 2020, FAI began growing in April, and was up 9.3% YoY in April-July 2020, resuming its role as the main driver of China's economy. Retail sales, meanwhile, declined YoY in every month of 2020. As the originator of Covid-19 (or the "Wuhan Coronavirus"), China had a two-month headstart on dealing with the crisis, and was able to contain it within Hubei province (of which Wuhan is the capital), the only part of China that was fully locked down in January and much of February. Once the rest of the world began to lock down, China was in position to reopen, and its exports have consequently accelerated steadily, growing 7.2% YoY in July and 9.5% YoY in August 2020. The rebound in FAI is, for now, being partly validated by the rebound in global demand for China's exports, at a time when much of the rest of the world is partially locked down.  This is well illustrated in the steel industry, where China's output has increased 5.9% YoY in the past 3 months (May-July 2020) while the rest of the world's steel output has declined 20.5% YoY. As long as the rest of the world's economy remains in various stages of lock-down, China's relatively undisrupted economy will gain global market-share. During this phase (likely to last at least through October 2020), investors should remain Overweight China. The weakness of private consumption means that any setback to China's exports (likely once the rest of the world's supply-chains begin normal functioning by November-December 2020) will be impossible to counter with domestic demand. The imbalances of excess capacity built up over the past 4 months of strong FAI (particularly public FAI) will then rebound on China. 

China: Investment-Driven Growth Exacerbates Imbalances--For the Future

China

The MSCI AC Asia Pacific excluding Japan Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31, 1987.

MSCI AC Asia Pacific Excluding Japan Index (MXAPJ INDEX)

MSCI AC Asia Pacific Excluding Japan Index

MSCI AC Asia Pacific Excluding Japan Index (MXAPJ INDEX)

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For investors seeking superior returns the case for investing in GBA companies has never looked stronger. Companies are investing in next...

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China's total social financing has increased by

Prasenjit K. Basu

RCEP Is Benefitting China, but Not ASEAN; Latter Gains US Market-Share

ASEAN's trade deficit with China nearly doubled in 2022 (1st year with RCEP implemented), as China's NTBs trumped tariff cuts. But China's surplus...

Prasenjit K. Basu

Biden Vs. Xi - What Are Businesses Doing?

The case for investing in GBA companies has never looked stronger. Companies are investing in next generation industries and are optimistic about...

Sharmila Whelan

Biden, US-China Relations & Xi's Plan

For investors seeking superior returns the case for investing in GBA companies has never looked stronger. Companies are investing in next...

Sharmila Whelan

Taiwan- Destined To Outperform

Our money is on Taiwan. The pandemic is behind, the economy is rebounding faster than anticipated. Underlying fundamentals are supportive of the...

Sharmila Whelan

China: Investment-Driven Growth Exacerbates Imbalances--For the Future

China's total social financing has increased by

Prasenjit K. Basu